Photo: Gargi Chaudhuri


Featuring BlackRock thought leaders and industry experts covering the big picture ideas from event sessions.

Video 06:03


We kicked off our studio chat series during our annual Fixed Income conference where our host, Kristy Akullian sat down with BlackRock leaders live from our studio to discuss how bond ETFs are helping transform fixed income markets — making them more digital, transparent, and efficient than ever before.

KRISTY AKULLIAN: Welcome to the iShares Studio Chats, a series of interviews featuring one-on-one conversations with BlackRock and industry leaders where we explore the macro themes and trends shaping today's markets. I'm Kristy Akullian, your host. Let's get started. Mark, thank you so much for joining us in the studio. We're really excited about the conversation.


MARK WIEDMAN: It's great to be here. Thank you.


KRISTY AKULLIAN: So, Mark, I know that you've worn many hats in your time here at BlackRock. Over that time and throughout those roles, how have you seen clients' needs evolve?


MARK WIEDMAN: So I think over the last 10 to 15 years, the asset management world has gone from a set of very different markets around the world to something that actually is much more coherent and consistent. 10, 15 years ago, in the wealth world in Europe, for example, or the United States, or in institutions, pension plans in the US versus in the UK, or for sovereign wealth funds in Asia, we're all in different languages, different priorities, different ways of talking about investments.


That's completely different now. What we're seeing is actually a set of trends that together define where most clients around the world are going. They're interested in the whole portfolio, not just individual products. They want more intimate, deeper, more demanding relationships with a smaller set of asset managers, just like we're seeing the same thing happen in our relationship, for example, with sales and trading firms.


We're seeing more and more clients everywhere reassessing what is the right architecture for their overall portfolio. Years ago, it was the 60/40. Many more clients than one would imagine actually had 60/40 portfolios. They didn't call it that, but that's what they had. That broke in 2022. And so clients are saying, what is my allocation going forward? Ironically, there's a much greater cause logic for owning bonds today than there's been for a long time.


KRISTY AKULLIAN: So, Mark, putting client challenges in the context of the current market, obviously, we're in a bit of a regime change. What are the biggest questions that you're hearing from clients now?


MARK WIEDMAN: I think there's three big questions that clients consistently are asking around the world. The first is, as you alluded to, money costs something now for the first time in 15 years. And a 40-year cycle of bringing down rates has ended in the West. OK, what do I do with my portfolio now? What business models are broken? Which ones will thrive in a world that where money costs something?


Commercial real estate. How is that going to get through a period where its financing costs are increasing? Growth equity, a sector that used to be — seems almost interest-rate independent, actually super interest rate sensitive. We're also seeing clients say, how do I recalibrate my whole portfolio in a world where money costs something? So that's the number one question.


The number two question we get from clients is, how do I invest in the transition to a low-carbon economy? So the transition to a low-carbon economy is about the gradual replacement of hydrocarbons for renewables as the energy source. And that can be in anything from manufacturing to shipping to aviation to powering your home.


Across all these sectors at different rates in the developed world, in Japan, even in China, we're seeing actual decarbonization occur at a quite rapid clip. And we're seeing it because basic technological forces have made renewable energy cheaper than, for example, putting up a new gas plant-- not an old gas plant, but a new gas plant. We're seeing consumer preferences change. We're seeing policy change very decisively in the United States and in Europe.


And then last, high hydrocarbon prices. All this is leading to the transition and investments in everything decarbonizing at a differential rate. Some sectors much more quickly — electricity generation. Some much more slowly, like aviation. How do I invest in that? It's a capital intensive transition. Where do I make money? How do I avoid losing money? How do I avoid being in a stranded asset? How do I actually not buy the wrong railroad in 1865?


And then the third big transformation is the political fragmentation and the dissolution of the pre-2015 investment and trade world. Put it simply, we are going to a world that's reconsidering the entry of China into the WTO in 2001. National security concerns that supply chain dependencies are now actually at the top of people's priority list. That means governments, but also companies and, therefore, investors.


But what does that mean for your portfolio? For global investors, for example, investors in Asia, in Japan, and South East Asia, and the Middle East, they're asking, what's the role of China in the portfolio? In the United States, clients are saying I don't want China in my portfolio. Those are new questions. And it all reflects this big political regime change. And I would say we're at the early stages of figuring out, what does it mean for companies and for investors? How do you build that portfolio for the future?


KRISTY AKULLIAN: So, Mark, you've talked a little bit about how investors are really rethinking their portfolios. How would you say that they're changing the way that they build those?


MARK WIEDMAN: So I think we're seeing a sea change in the tools that clients use. It used to be that people built portfolios with underlying securities and sometimes maybe an active strategy. But today's investor looking at a more dynamic world where you have to adjust your portfolio more quickly, where the regime change is occurring is saying I want to build that portfolio heavily on ETFs.


KRISTY AKULLIAN: Mark, thank you so much for sharing your insights and for being here with us today.


MARK WIEDMAN: It's been a privilege. And thank you.


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